Seventh Pay Commission submitted its report to the Central Government

On 19^th November, the Seventh Pay Commission led by Justice A.K. Mathur submitted its report to the Finance Minister Mr. Arun Jaitley, recommending an overall pay hike of 23.5% for central government employees. The report recommended a 16% hike in salary, 63% in allowances and 24% in pensions thus making it an overall hike of 23.5% which is much less than the 35% hike given on the implementation of 6^th Pay Commission.

The Highlights of the 7^th Pay Commission Report are:

• Recommended date of implementation is 01.01.2016
• The minimum pay in government is recommended to be set at Rs. 18,000 per month and maximum to be Rs. 2, 25,000 per month for Apex Scale and Rs. 2, 50,000 per month for Cabinet Secretary and others presently at the same pay level.
• The total financial impact in the FY 2016-17 is likely to be Rs. 1, 02,100 crore, over the expenditure. Of this, the increase in pay would be Rs. 39,100 crore, increase in allowances would be Rs. 29,300 crore and increase in pension would be Rs. 33,700 crore.
• Out of the total financial impact of Rs. 1, 02,100 crore, Rs. 73,650 crore will be borne by the General Budget and Rs. 28,450 crore by the Railway Budget.
• In percentage terms the overall increase in pay & allowances and pensions over the ‘Business As Usual’ scenario will be 23.55 percent. Within this, the increase in pay will be 16 percent, increase in allowances will be 63 percent, and increase in pension would be 24 percent.
• The total impact of the Commission’s recommendations are expected to entail an increase of 0.65 percentage points in the ratio of expenditure on (Pay+Allowances+ Pension) to GDP compared to 0.77 percent in case of 6^th Pay Commission.
• The present system of pay bands and grade pay has been dispensed with and a new pay matrix has been designed. Grade Pay has been subsumed in the pay matrix. The status of the employee, hitherto determined by grade pay, will now be determined by the level in the pay matrix.
• The rate of annual increment is being retained at 3 percent.
• Modified Assured Career Progression (MACP): The Commission has also proposed that annual increments not be granted in the case of those employees who are not able to meet the benchmark either for Modified Assured Career Progression (MACP) or for a regular promotion in the first 20 years of their service. Also performance benchmarks for MACP have been made more stringent from “Good” to “Very Good”.
• Short Service Commissioned Officers will be allowed to exit the Armed Forces at any point in time between 7 and 10 years of service, with a terminal gratuity equivalent of 10.5 months of reckonable emoluments. They will further be entitled to a fully funded one year Executive Programme or a M.Tech. Programme at a premier Institute.
• Allowances: The Commission has recommended abolishing 52 allowances altogether. Another 36 allowances have been abolished as separate identities, but subsumed either in an existing allowance or in newly proposed allowances. Allowances relating to Risk and Hardship will be governed by the proposed Risk and Hardship Matrix.
• Since the Basic Pay has been revised upwards, the Commission recommended that HRA be paid at the rate of 24 percent, 16 percent and 8 percent of the new Basic Pay for Class X, Y and Z cities respectively. The Commission also recommended that the rate of HRA will be revised to 27 percent, 18 percent and 9 percent respectively when DA crosses 50 percent, and further revised to 30 percent, 20 percent and 10 percent when DA crosses 100 percent.
• In the case of PBORs of Defence, CAPFs and Indian Coast Guard compensation for housing is presently limited to the authorised married establishment hence many users are being deprived. The HRA coverage has now been expanded to cover all.
• Any allowance not mentioned in the report shall cease to exist.
• Pension: The Commission recommended a revised pension formulation for civil employees including CAPF personnel as well as for Defence personnel, who have retired before 01.01.2016. This formulation will bring about paritybetween past pensioners and current retirees for the same length of service in the pay scale at the time of retirement.
• The past pensioners shall first be fixed in the Pay Matrix being recommended by the Commission on the basis of Pay Band and Grade Pay at which they retired, at the minimum of the corresponding level in the pay matrix.
• This amount shall be raised to arrive at the notional pay of retirees, by adding number of increments he/she had earned in that level while in service at the rate of 3 percent.
• In the case of defence forces personnel this amount will include Military Service Pay as admissible.
• Fifty percent of the total amount so arrived at shall be the new pension.
• An alternative calculation will be carried out, which will be a multiple of 2.57 times of the current basic pension.
• The pensioner will get the higher of the two.
• Gratuity: Enhancement in the ceiling of gratuity from the existing Rs. 10 lakh to Rs. 20 lakh. The ceiling on gratuity may be raised by 25 percent whenever DA rises by 50 percent.
• Disability Pension for Armed Forces: The Commission is recommending reverting to a slab based system for disability element, instead of existing percentile based disability pension regime.
• Ex-gratia Lump sum Compensation to Next of Kin:The Commission is recommending the revision of rates of lump sum compensation for next of kin (NOK) in case of death arising in various circumstances relating to performance of duties, to be applied uniformly for the defence forces personnel and civilians including CAPF personnel.
• Martyr Status for CAPF Personnel: The Commission is of the view that in case of death in the line of duty, the force personnel of CAPFs should be accorded martyr status, at par with the defence forces personnel.
• New Pension System: The Commission received many grievances relating to NPS. It has recommended a number of steps to improve the functioning of NPS. It has also recommended establishment of a strong grievance redressal mechanism.
• Performance Related Pay: The Commission has recommended introduction of the Performance Related Pay (PRP) for all categories of Central Government employees, based on quality Results Framework Documents, reformed Annual Performance Appraisal Reports and some other broad Guidelines. The Commission has also recommended that the PRP should subsume the existing Bonus schemes.

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